How to Buy Long Term Care, Part One

 

When those three words, long term care, are spoken, what are the first thoughts that come to mind? There certainly is a lot being discussed and written about this issue. This article will give you the clarity you need about the following main questions about Long Term Care. It is meant to answer your initial questions so that you can thoughtfully begin your Long Term Care Education. This article will assist you with the following initial questions:

 

  • What is Long Term Care?

  • Should I purchase a Long Term Care plan to protect my family and my assets?

  • When should I purchase Long Term Care coverage?

 

Long Term Care is a type of insurance that provides the kind of assistance that one may need later in life or as the result of a prolonged illness or disability. Today, people are living longer, which can be attributed to:

 

• Advancements in medicine allowing people to live longer and survive serious illnesses

• Awareness on various health related matters via the web and media

• Knowledge of the benefits of nutrition, physical exercise, and personal habits

 

For many people, the decision to purchase a Long Term Care plan often depends upon whether or not they have experience with a friend or loved one who needed extended care. If you have had such prior experience, you already understand the need for Long Term Care and the stress and impact upon family members when there is no Long Term Care plan in place.

 

Long Term Care may be the next logical step in your financial planning. Like any part of a financial plan, it is important to become educated and determine what role, if any, Long Term Care should play in your financial plan. You may ask yourself the following three questions:

 

WILL LONG TERM CARE

• Protect my financial plan?

• Protect my loved ones from having to deliver my Long Term Care plan?

• Protect my assets, income and family?

 

SHOULD I FUND ALL OR PART OF THE LONG TERM CARE RISK MYSELF? CAN I AFFORD TO DO SO?

One must understand what the total prevailing costs of Long Term Care are for the area that you plan to receive care in. After considering the cost of care you may then decide what portion of this expense to fund. Consult with your LTC advisor as to what the current prevailing costs of Long Term Care are in your area for:

  • Home Care Hourly Costs:

  • Home Health Aide Hourly Costs

  • Homemaker Hourly Costs

  • Adult Day Services Daily Costs

  • Assisted Living Monthly Base Rates

  • Nursing Home Daily Costs:

  • Semi-Private Daily Room Rates

  • Private Room Daily Rates

 

When Should I Purchase Long Term Care Coverage?

 

Many start contemplating this purchase when they are around the age of 40. One thing to manage is your insurability. In other words, you must apply for and secure Long Term Care when you are healthy enough to qualify for it. If you delay the purchase of Long Term Care, here are some concerns:

  • Your insurability

  • Market Forces: what products are currently available

  • Tax Matters: whether or not it is advantageous for you or your business from a tax perspective to purchase Long Term Care for you and/or your employees

  • Cost of Waiting: the longer you wait, generally the more premium you will pay. Premiums generally increase 3% to 4% for each year in age. For example, a 41 year old may pay 3% to 4% more in premium than a 40 year old for the exact same LTC plan design. Many consider delaying the purchase of Long Term Care for a period of years and because of this fact may actually end up paying more in premiums given their life expectancy.

  • Progress to date with your personal financial planning

  • Progress to date with your employee benefit planning

 

My next article will address the process of procuring long term care coverage.

 

Corey Rieck is on the Caregiver Communications Board and President & Founder of Long Term Care Planning Group

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